Much of the federal subsidy that has helped clean up abandoned oil wells in Alberta may have simply replaced money that fossil companies would have spent anyway, according to a new analysis.
That means the public is likely paying for private companies’ pollution, says the report issued last week by Oxfam Canada, the Parkland Institute, and the Corporate Mapping Project.
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“It’s hard to say because the data is so limited,” said lead author Megan Egler. “But what I did find is highly, highly suggestive that this funding simply was just replacing the money that would have otherwise been spent by these oil and gas producers.”
Last spring, the federal government announced C$1.7 billion for the cleanup of unreclaimed oil and gas wells in Canada, a move that one veteran climate campaigner called “a major turning point”. Most of that money—$1 billion—went to Alberta, where the largest problem exists. The province’s United Conservative government administered the funding.
Egler found that in 2019, Alberta’s energy industry spent about $340 million on remediation as part of the province’s area-based closure program, which represents about 70% of Alberta’s cleanup activity. The following year, after the start of the federal funding, fossils spent $363 million.
“I started looking at the spending in past years and it was more or less the same,” Egler said.
Much company-funded remediation actually ended after the announcement of the federal program, she added. “A lot of these companies actually stopped all their closure work.”
Egler said her research also raised questions about which companies received the funding. Almost one-quarter of the $800 million distributed so far went to just five companies, she said.
One of them, Canadian Natural Resources Limited, got more than $100 million. CNRL is a profitable company that recently beat analysts’ revenue and dividend forecasts.
Egler notes that funding was not distributed on the basis of which wells had been unreclaimed the longest or posed the greatest environmental threat. Rather, the first two funding periods were aimed at producers that could not afford the cleanup or were defaulting on landowner lease payments.
But because Alberta would have already been likely to pick up the tab in those circumstances, she said the federal funding just transferred dollars from one government to another.
“The cleanup of these sites relieves both the defaulting owners and the government from paying compensation to landowners,” says the report.
The program does seem close to meeting Alberta’s job targets, with more than 1,700 jobs funded so far.
But Egler said there’s no way to know if those jobs would have existed anyway—and as job creation goes, they were expensive: each of them took almost $190,000 in subsidies, $41,000 more per job than similar work done by the province’s Orphan Well Association.
“There has been no clear explanation from the government of Alberta why the public dollars to create one job are higher,” the report states.
Nor was the program measured for its contribution to Canada’s climate goals. Unremediated oil and gas wells are a significant source of methane, a potent greenhouse gas.
Alberta Energy Minister Sonya Savage said the report contained inaccuracies, but didn’t say what they were. “The report…fails to reflect the significant progress made by Alberta’s government on addressing a number of issues it identifies,” the former pipeline executive told CP in an email.
“We are supporting the economic recovery by making use of Alberta’s specialized oil and gas labour force at a time when they are in need of work.”
Savage said the government works with industry and Indigenous groups to continuously improve the program. But Egler said her report raises questions about the program that aren’t being answered.
“One billion dollars cleaning up wells and providing employment—there’s nothing wrong with that,” she said. But “we could have had a program that spent the money better. It just ended up being a subsidy for oil and gas producers.”
This report by The Canadian Press was first published July 7, 2021.
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